The Office of General Counsel issued the following informal opinion on April 15, 2002, representing the position of the New York State Insurance Department.
Re: Named Driver Exclusions in Commercial Auto Liability Policy
Question Presented:
Does New York law permit an insurance company to attach an endorsement to a commercial automobile liability insurance policy that provides that the company will not be liable for any accidents or losses occurring while a covered automobile is driven by a specifically named person?
Conclusion:
No. Such an endorsement violates the provisions of N.Y. Comp. Codes R. and Regs. tit. 11, § 60-1.1 (Reg. 35-A).
Facts:
Mr. A, CFO and General Manager of Company B, states that during negotiations, Company Bs insurance company told Company B that it planned to exclude certain drivers from coverage on Company Bs commercial automobile liability renewal policy. The insurance company told Company B that such an exclusion is legal and that it would not issue the renewal policy unless the drivers were excluded from coverage. Mr. A has sent the Department a copy of a document entitled "Driver Exclusion," which Mr. A says was attached to the policy, and which states that "This endorsement changes the policy," and that "We will not be liable for any accidents or losses while a covered auto is driven by: [name redacted]." The document is signed by the named insured. Mr. A has asked whether the driver named in the Driver Exclusion is covered under the policy.
Analysis:
N.Y. Comp. Codes R. and Regs. tit. 11, § 60-1.1 (Reg. 35-A) states in pertinent part as follows:
An "owners policy of liability insurance", as defined in section 311 of the Vehicle and Traffic Law, shall contain in substance the following minimum provisions or provisions which are equally or more favorable to the insured and judgment creditors, so far as such provisions relate to judgment creditors:
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(c) A provision insuring as "insured" (1) the named insured and, if an individual, his or her spouse if a resident of the same household with respect to the motor vehicle or vehicles; (2) any other person using the motor vehicle with the permission of the named insured or such spouse provided his or her actual operation or (if he or she is not operating) his or her other actual use thereof is within the scope of such permission; and (3) any other person or organization but only with respect to his, her or its liability because of acts or omissions of an insured within paragraph (1) or (2) of this subdivision. As respects any person or organization other than the named insured or such spouse the policy need not apply (i) to any person or organization, or to any agent or employee thereof, employed or otherwise engaged in operating an automobile sales agency, repair shop, service station, storage garage or public parking place, with respect to any accident arising out of the maintenance or use of a motor vehicle in connection therewith; (ii) to any employee with respect to injury, sickness, disease or death of a fellow employee injured in the course of his or her employment in an accident arising out of the maintenance or use of the motor vehicle in the business of their common employer; or (iii) to any person or organization, or to any agent or employee thereof, with respect to bodily injury, sickness, disease or death, or injury to or destruction of property arising out of the loading or unloading of the motor vehicle.
No owners policy of liability insurance, commercial or otherwise, may exclude as "insured" any person or organization other than those persons or organizations expressly permitted to be excluded under N.Y. Comp. Codes R. and Regs. tit. 11, § 60-1.1(c)(3) (Reg. 35-A). As the Driver Exclusion that Company Bs insurance company attached to Company Bs policy excludes a specifically named individual from coverage, and § 60-1.1(c)(3) does not expressly permit specifically named individuals to be excluded as "insureds" from an automobile liability policy, the provisions set forth in the Driver Exclusion violate § 60-1.1(c)(3).
N.Y. Ins. Law § 3103(a) (McKinney 2001-2002) states as follows:
(a) Except as otherwise specifically provided in this chapter, any policy of insurance or contract of annuity delivered or issued for delivery in this state in violation of any of the provisions of this chapter shall be valid and binding upon the insurer issuing the same, but in all respects in which its provisions are in violation of the requirements or prohibitions of this chapter it shall be enforceable as if it conformed with such requirements or prohibitions.
It is the Departments opinion that, pursuant to N.Y. Ins. Law § 3103(a) (McKinney 2001-2002), Company Bs commercial automobile liability policy is valid and binding upon its insurance company, notwithstanding the fact that the Driver Exclusion provisions may violate N.Y. Comp. Codes R. and Regs. tit. 11, § 60-1.1(c)(3) (Reg. 35-A). Accordingly, Company Bs policy is enforceable under N.Y. Ins. Law § 3103(a) (McKinney 2001-2002) as if the Driver Exclusion, which is written on a form that is unapproved by the Department, was not attached to it. Thus, it is the Departments opinion that the liability coverage provisions of Company Bs policy are binding upon its insurance company with respect to any accidents or losses occurring while a covered automobile is driven by the person named in the Driver Exclusion that Mr. A has sent the Department, notwithstanding the fact that the Driver Exclusion states that Company Bs insurance company is not liable for such accidents or losses, as long as such person is driving the automobile with the permission of the named insured or the named insureds spouse.
Mr. A may want to consider filing a complaint with the Departments Consumer Services Bureau regarding this matter. In any event, in order for the Department to determine whether this insurer is using the Driver Exclusion as a regular practice, the Department requests that Mr. A provide it with the name of the insurer.
For further information you may contact Senior Attorney Ethan G. Wolfe at the New York City Office.